Posted on: November 18, 2022, 12:48h.
Final up to date on: November 18, 2022, 12:53h.
DraftKings (NASDAQ: DKNG) inventory traded modestly larger Friday amid a few favorable headlines, together with a brand new bullish sell-side name.
In a be aware to purchasers on Friday, Piper Sandler analyst Matt Farrell began protection of the net sportsbook operator with an “chubby” score and a $21 worth goal, which suggests upside of about 41% from the November 17 shut. The analyst famous that the place the gaming fairness presently resides might be “a lovely long-term entry level.”
Farrell’s bullish view on DraftKings arrives because the inventory suffered some setbacks earlier this month after the corporate forecast a wider-than-expected 2023 earnings earlier than curiosity, taxes, depreciation, and amortization (EBITDA) loss, prompting a number of analysts to trim worth forecasts on the identify.
With profitability expectations reset after the preliminary 2023 information, we imagine present ranges characterize a lovely long-term entry level, significantly with the chance of a future capital elevate largely diminished,” wrote the analyst.
Most analysts protecting the gaming fairness have optimistic scores on the shares and the consensus worth goal is near $21.
DraftKings’ Path to Profitability
Whereas the 2023 steering issued by the sportsbook operator earlier this month upset buyers, the silver lining is the funding neighborhood has extra readability on DraftKings’ pathway to profitability.
It seems the corporate may break even on EBITDA, or be barely worthwhile within the fourth quarter of 2023. That’s pivotal at a time when a few of DraftKings’ greatest rivals are closing in on the tip of their money-losing methods.
“Moreover, whereas we perceive the profitability scrutiny within the present atmosphere, we really feel it considerably misses the forest for the bushes, as buyers would seemingly be questioning the broader market alternative if the corporate have been worthwhile in This fall 2022,” added Farrell.
Maybe coincidentally, the analyst’s new protection of DraftKings arrived on the identical day that Maryland lastly offered a date for the debut of cell sports activities betting. The state, which permitted sports activities wagering in a 2020 poll initiative, is likely one of the most generally anticipated additions to the regulated sports activities wagering fray as a result of disposable earnings is excessive within the state and residents are keen about sports activities.
Different DraftKings Catalysts
Talking of state-level catalysts for DraftKings inventory, Piper Sandler’s Farrell famous “a gradual cadence of legalization.” Massachusetts and Ohio are the marquee states readying to hitch the cell sports activities betting lineup over the close to time period.
DraftKings additionally carved out a rising area of interest within the web on line casino market, which is notable as a result of that trade gives higher margins than sports activities betting, and its long-term progress profile may show superior as extra states approve it. Farrell’s whole addressable market forecast for US and Canadian sports activities betting and iGaming is formidable at $80 billion.
“Total, we advocate buyers personal DraftKings for publicity to the quickly rising on-line sports activities betting and iGaming markets,” concluded the analyst.